Lions Gate Proposes MGM Merger Backed by Icahn

Published August 1, 2011

Fox Business

Lions Gate Entertainment (NYSE:LGF) said Tuesday it is seeking a merger with financially troubled studio Metro-Goldwyn-Mayer following “detailed discussions” with MGM’s largest shareholder, Carl Icahn, who owns stakes in both companies.

Under the terms of the deal, the combined company would be owned by Lions Gate shareholders and MGM creditors.

Lions Gate said it believes the company’s top three shareholders, including Icahn, MHR Fund Management and Capital Research Global Investors, are all “supportive of the transaction,” according to filings with the Securities & Exchange Commission.

Though no financial details were disclosed, a report in the Los Angeles Times said late Monday that the deal would give MGM’s lenders a 55% stake in the new company.

The deal would replace the company’s current bankruptcy plan, in which MGM would combine with privately held Spyglass Entertainment in an agreement that would provide lenders with a 95% stake in the Hollywood studio.

However, if lenders of MGM, a privately held movie, television and theatrical production company, choose to take a different offer, they will still have to pay Spyglass a breakup fee of $4 million to $5 million, according to the report.